Mozambique and coal

Mozambique currently produces only a minor amount of coal. However, major global mining companies such as Vale and Rio Tinto are developing major coking coal export projects which would make Mozambique one of the world's major coal exporters. Some of the proposed new coal mines have been proposed with mine-mouth power stations as one of their markets. In May of 2011 the Brazilian company Vale began coal production Moatize, Mozambique. and the following month Rio Tinto completed its takeover of Riversdale Mining which commenced the development of the Benga coal mine and has the title for the Zambeze Project.

Overview
In a July 2010 investor presentation, the then Australian coal company Riversdale Mining, argued that Mozambique had the potential to become a major global supplier of hard coking coals and especially to Brazil, Europe, India and China. In 2010 the company stated that the current global seaborne coking coal market was 172 million tonnes of which Australia was the dominant supplier producing 110 million tonnes or a 64% share of the market. The U.S. exported 29 million tonnes (17), Canada 18 million tonnes (11%) with other countries such as Poland, China, Russia, New Zealand and other countries exporting 15 million tonnes.

Based on November 2009 data from Wood MacKenzie, Riversdale stated that in 2025 the global seaborne hard coking coal market would have grown to approximately 307 million tonnes with Australia producing 154 million tonnes (50%), Mozambique 54 million tonnes (18%), Poland, China, Russia, New Zealand and other countries 46 million tonnes (15%), Canada 27 million tonnes (9%) and the US 25 million tonnes (8%).

In particular, Riversdale Mining argued that major potential markets for coal from Mozambique were existing and planned blast furnaces in coastal China, India and Brazil and new coastal power stations in India. The company argued that Mozambique suppliers would have a freight advantage for power stations on the west coast of India over both South Africa and Australia. It also argued that supplies from Mozambique would represent a "long term supply diversification prospect".

Existing coal mining projects

 * In its 2009 review of the coal mining industry of Mozambique, the U.S. Geological Survey noted that the government-owned Carbomoc E.E. produced approximately 60,000 tonnes of coal tonnes of bituminous coal from the Chipanga XI Mine at Moatize. In 2007 the USGS reported that the mine produced 72,000 tonnes.


 * The U.S. Geological Survey also reported that "CVRD of Brazil announced plans to spend $70 million on the development of the Moatize coalfield in 2007. The company planned to produce 12 Mt/yr of coking and thermal coal at the Moatize Mine starting in 2010. The coking coal was likely to be consumed by steel plants in Brazil; thermal coal would be consumed by a new coal-fired powerplant built by CVRD in Mozambique with a capacity of 1,500 megawatts. In the second phase of the project, CVRD planned to increase coal production to 20 Mt/yr. The life of the Moatize Mine was expected to be 35 years. Capital costs of the project were estimated to be between $1.2 billion and $2 billion."


 * In May 2011 it was announced that Brazilian company Vale began coal production at an open cast mine in Moatize, Mozambique. Mozambique's President Armando Guebuza and Vale Chairman Roger Agnell in early May 2011 detonated the first charge of explosives initiating coal production. President Guebuza declared that the ceremony was the confirmation that "what was previously a dream is now a majestic undertaking in which natural resources are driving the development of Mozambican human resources". Vale invested about US $2.0 billion in Mozambique as of May 2011, and the company stated that it intended to invest a further US $4.0 billion over the next five years. Vale expected exports of coal to begin within by July 2011, despite delays in rebuilding the Sena railway line, which links Moatize to the port of Beira. Currently, Vale-Mozambique employs approximately 8,000 workers, more than 85 percent of whom said to be Mozambican. "In the second phase of the project, which is already being developed, we will employ 15,000 workers," said a company spokesman.


 * The U.S. Geological Survey also reported that "Central African Mining and Exploration Company plc (CAMEC) of the United Kingdom hoped to identify sufficient coal resources at its properties in the Tete Province to start a new mine by 2012. The company engaged in drilling at these licenses in 2007. CAMEC also formed a joint venture with Belde Empreendimentos Mineiros Limitada of South Africa for three licenses in the Zambezi Coal Basin in Tete Province."


 * The Benga coal mine in Mozambique is a metallurgical coal mine which was initially commenced by Riverdale Mining prior to the company being taken over in June 2011 by Rio Tinto. Tata Steel is a 35% joint venture partner in the project. The mine received government approval in January 2010. Resources at Benga were estimated to be about 1.23 billion metric tons.


 * In June 2011 Rio Tinto completed its takeover of Riversdale Mining. Rio Tinto said it may add 25 million metric tons of Mozambique coal to its annual output after the takeover: “When you add it up, Rio will be potentially producing, by 2016-17, 25 million tons of product, both coking and thermal” coal, Riversdale Managing Director Steve Mallyon said. Rio's Benga coal mine project in Mozambique, due to begin output in November or December 2011, will ship about 5 million tons of unprocessed coal and may expand to 20 million tons. Mallyon also flagged that Rio may keep a larger stake than the 10 percent to 12 percent proposed by Riversdale in the proposed $1.3 billion Benga Power Plant. Mallyon suggested that Eskon may purchase power from the proposed plant.


 * On January 30, 2011, South Korean steel group Posco said it had agreed with Brazilian group Vale to the joint development of a coal mine in the in Tete province of Mozambique. In a statement, the group said that the coal mine could produce 11 million tons of coal per year, to be used for generating electricity. While the news reports didn't specifically mention the mine name, the only mine that Vale is developing is Moatize mine. In a later story Reuters reported that POSCO denied the earlier report and said that "we don't have any plan to develop a coal mine in Mozambique with Vale and our earlier statement had factually wrong information".

Possible coal projects
On July 31, 2010, Mozambique state radio announced that about 1 billion tonnes of coal had been found in the Cahora Bassa district of the northwestern province of Tete. Prospecting for the mineral had been carried out by a company from Kazakhstan, which is interested in exploring the coal in the Chitima administrative post of Cahora Bassa. Mineral resources minister Esperanca Bias who told Radio Mozambique that a feasibility study, lasting for one and a half years, is under way, and exploration of the coal will start two years after. Large quantities of coal were also found in the Moatize district of the same province. In August 2010 Jindal Steel & Power announced the discovery of coal reserves of 1.65 billion tonnes in Cahora Bassa district. It hopes to produce 2.5 million tonnes of coal a year as from 2011, rising to 7.4 million tonnes as from 2013. The three companies, plus a Mozambican company, Carvoeira de Samoa, are also exploring in Mutarara, Maravia, and Zumbo districts.


 * The Zambeze Project is coal project being considered by the Australian coal company, Riversdale Mining. The project adjoins the Benga coal mine, which is currently under construction. The Zambeze Project is estimated to have reserves of 1.7 billion tons, may produce 42 million tons a year, rising to as much as 90 million tons of unprocessed coal, making it one of the world’s largest coal mines. In September 2010, coal deposits were confirmed in the districts of Changara, Cahora Bassa, and Magoe, in the western Mozambican province of Tete, as a result of exploration undertaken since 2008 by the companies Jindal Steel & Power, Essar and Eta Star, according to the provincial director of mineral resources and energy, Adelaide Pedro de Jesus. Jindal Steel and Power Limited and the Essar group are Indian companies, while ETA Star is based in Dubai.


 * On Feb. 4, 2011, Mozambique said it awarded the Indian company, Jindal Steel & Power, a 25-year licence to explore and mine for coal in the northwest Tete province. Jindal will invest $180 million in the Tete coal mine, as part of a project that will cover 2,1540 hectares. The government will own a 10 percent stake.


 * In January 2011, it was reported that Coal India planned to import 10 million metric tons of coal from Mozambique over the next five years, where the company has prospecting rights to two blocks in the northwest of the country measuring 225 square kilometers (87 square miles). If viable coal deposits are found, the company claims that it intends to invest $400 million and employ 3,000 people to extract them. Coal India also wants to secure rights in five other exploration blocks, and export the coal to India through the port of Beira and perhaps - after 25 years - the Nacala port.

Coal Infrastructure
In March 2011, the then Australian company Riversdale Mining stated that it would invest $46 million in locomotives to carry coal from its Benga coal mine in Mozambique to Beira port. Riversdale will buy 11 locomotives and 200 railcars for the rail line. According to a Bloomberg report, the locomotives and railcars will probably be delivered in April 2011 before the mines starts exporting coal in September 2011. The Benga mine is expected to produce 5.3 million metric tons (mt) of metallurgic coal a year by the second half of 2011, some of it for the proposed Benga Power Plant. Output may rise to 20 million mt of met coal a year by 2013, of which 10 million mt will be exported. The project, jointly owned by Tata Power's Tata Steel, has an estimated coal reserve of 502 million mt.

According to Riversdale's Managing Director Steve Mallyon a "scoping study", completed on a "Richards Bay-type" coal terminal in Mozambique in May 2011, looked likely. Richards Bay Coal Terminal is Africa’s largest coal terminal, with an annual capacity of 91 million tons. The location he was referring to was not reported.

Nacala port is a possible location for a new export terminal for coal produced from the Moatize coalfield in Mozambique. A news report in 2009 cited Mozambique’s Transport Minister Paulo Zucula stating that the government had secured $500m from the Dutch government and the European Union to to build a new railway line from Moatize to the deep-water Nacala port by 2015. In July 2011 it was announced that Vale began studies on building a coal terminal at Nacala port in northern Mozambique. The project is expected to cost about $1.5 billion.

Proposed coal-fired power stations
Prior to its takeover by Rio Tinto, Riversdale Mining touted the possibility of building the $1.3 billion Benga Power Plant, a proposed 2000 megawatt (MW) mine-mouth coal-fired power station associated with the Benga coal mine. Riversdale Mozambique Limitada, a subsidiary of the Australian coal mining company Riversdale Mining, have proposed that stage one of the project would be 500 MW power station with a later expansion. The project received approval from the Mozambique government in January 2010. However, following Rio's takeover of Riversdale there is some uncertainty about the project. In the course of the takeover negotiations, neither Riversdale or Rio mentioned the Benga Power Plant proposal. However, Rio Tinto's corporate strategy is focussed on its role as a mining company not as an independent power producer. (The company's power station interests extend only as far as projects supplying company aluminium smelters and remote mineral processing plants.)

Following the takeover of the company, Mallyon also flagged that Rio may keep a larger stake than the 10 percent to 12 percent proposed by Riversdale in the proposed. Mallyon suggested that Eskom may purchase power from the proposed plant.

Related SourceWatch articles

 * Global use and production of coal
 * Brazil and coal
 * Nacala port

External resources

 * International Energy Agency, "Coal in Mozambique in 2006", International Energy Agency website, accessed August 2009.
 * U.S. Geological Survey, "The Mineral Industry of Mozambique", reports 1994-2007,
 * Thomas R. Yager, "The Mineral Industry of Mozambique: 2007, U.S. Department of the Interior, U.S. Geological Survey, February 2009.

External articles

 * "Riversdale wants to start coal mining in Benga, Mozambique in 2011", Macauhub, July 20, 2009.